System and Method for Budgeting, Planning, and Supply Chain Management

Abstract

A system and method for optimizing planned profitability and network design. The system integrates sales and marketing planning and budgeting with the supply chain. This integration is achieved by inclusion of data representative of non-physical sales, general, and administrative (SG&A) costs, by development of response curves including sales and marketing SG&A costs, and by development of capacitation cost curves including nonphysical SG&A costs and supply chain costs. The optimality of the plan according to the present invention is made possible by applying optimization techniques to the integrated data. The optimality of the network design according to the present invention is made possible by making demands available for optimization.

Description

RELATED APPLICATIONS [0001] This non-provisional patent application based on U.S. provisional patent application Ser. No. 60 / 606,642, filed Sep. 1, 2004.BACKGROUND OF THE INVENTION [0002] This invention relates to an improved system and method for data processing and forecasting refinement, and in particular to a system and method for budgeting and planning management, and supply chain network design and management. [0003] According to the Council of Supply Chain Management Professionals, the definition of a supply chain is: [0004] 1) starting with unprocessed raw materials and ending with the final customer using the finished goods, the supply chain links many companies together. 2) the material and information interchanges in the logistical process stretching from acquisition of raw materials to delivery of finished products to the end user. All vendors, service providers and customers are linked in the supply chain. (Supply Chain Visions, Logistics Terms and Glossary, compiled b...

AI Technical Summary

Benefits of technology

[0047] The present invention integrates sales and marketing planning and budgeting with the current supply chain, and can so do company-wide. The invention is optimal for network design by the inclusion of non-physical SG&A costs not considered with prior art systems. The present invention avoids missed profit opportunity and employs true optimization techniques. By use of the present invention, a sales and marketing budget can be realigned when significant changes in performance or assumptions occur during execution of the method of the present invention.

[0048] The method of the present invention is not solely dependent upon the past for planning, and takes more variables into account. The present invention does not require the collection of a great level of detail, thereby reducing total prior art administrative costs. With the present invention, the cost / volume relationships are not made arbitrarily linear, and, therefore, the present invention allows for the generation of fully loaded profiles for either products or customers, to generate accurate non-fully loaded profiles for either products or customers, to generate profiles for more than one criteria at a time, and to generate predictive profiles.

Problems solved by technology

Instead, demand is fixed, thereby reducing the optimality of the solution.

As previously mentioned, supply chain network design and management systems do not take into account demand drivers—sales and marketing activities and processes.

Also, the sales and marketing plans are often repetitive and without creativity.

As a result, many managers view the planning process as a ritual rather than a useful tool.

Do not permit for comparisons as optimal results are obtained using object functions other than profit, such as shareholder value, economic value, customer equity, so the company cannot access the extent to which different corporate objectives are compatible.

Cannot realign sales and marketing budgets during the plan's execution when significant changes in performance or assumptions occur during the plan's execution.

Therefore, profit improvement opportunities are missed.

Because the volume relationship to non-physical costs such as selling, general and administrative (“SG&A”) expenses, including sales and marketing costs, are not included, these volume / costs relationships cannot be made analytically more accurate over time.

In most cases, the past is unreliable in representing the future, and may only account for inflation and no other variable.

Further, all three processes are subject to budget “gaming”.

“Traditional planning and budgeting methods carry many unpleasant connotations due to somewhat dysfunctional practices.

Plans and budgets may be highly detailed, but they have low confidence.

The detail may imply accuracy and precision but the assumptions are questionable.

There are often too many iterations based on organizational politics that still arrive at unrealistic projections of expenses.”

ABB does not, however, provide a system and method for optimizing true profit.

ABB further requires collection of very detailed data, with such collection burdensome to gather.

Also, despite the fact that a great deal of detail is required to support ABB, the results are inaccurate because not all spending is covered by the ABB process.

The traditional allocation budgeting techniques are necessarily inaccurate because the maximally profitable quantities are not known prohibiting allocation thereof.

Comparisons are not possible as optimal results are obtained using object functions other than profit, so that the company cannot assess the extent to which different corporate objectives are compatible.

Demand cannot be redesigned during the plan's execution when significant changes in performance or assumptions occur, as one cannot realign the demand driver expenditures during the plan's execution.

As a result, profit improvement opportunities are missed.

Volume / cost relationships cannot be made analytically more accurate over time, because the volume relationship to non-physical costs are not included in the model.

Thus, strategic activity-based management does not address the desire to integrate demand drivers with supply chain management.

This suboptimality arises because many costs are allocated, and, therefore, do not reflect the actual relationship these costs have with volume.

If profiling a non-fully loaded p / l using strategic ABM, profiles generated for either products or customers are necessarily inaccurate because many sustaining costs are ignored.

Further, profiles can only be created for one attribute at a time—not combinations, such as products and customers—with strategic ABM.

Because it is not possible to simultaneously profile products and customers, product profiles have unprofitable customers embedded therein, and customer profiles have unprofitable products embedded therein.

Thus, the most profit effective actions to address both are not possible with ABM.

Also, as previously mentioned, comprehensive predictive profiles cannot be created with ABM.

Also, demand should not be fixed to limit the benefits of optimization, but, rather, a function of demand driver costs.

Such SG&A costs include costs such as sales and marketing expense, customer financial expenses, costs associated with a customer, costs associated with a product, costs independent of a customer, and costs independent of a product.

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